2012 (7) TMI 1153 - AT - Income Tax

Tribunal affirms CIT's revision order under section 263, emphasizing lack of evidence for property conversion

The Tribunal upheld the revision order by the CIT under section 263 of the Act, finding the original assessment order erroneous and prejudicial to the ... - Issues Involved:1. Jurisdiction u/s 263 of the Act.2. Examination of twin conditions of error and prejudice to the interest of the revenue.3. Timeliness and validity of the revision order.4. Consideration of evidence and assumption of facts.5. Entitlement to deduction u/s 54F.Summary:1. Jurisdiction u/s 263 of the Act:The CIT assumed jurisdiction u/s 263 of the Act to revise the reassessment order dated 31-12-2009. The assessee contended that the CIT erred in assuming this jurisdiction without proper reasons and justification.2. Examination of Twin Conditions:The CIT failed to appreciate that the twin conditions of error in the order sought to be revised, which caused/causing prejudice to the interest of the revenue, were not satisfied concurrently on the facts and in the circumstances of the case.3. Timeliness and Validity of the Revision Order:The assessee argued that the revision order was passed out of time, invalid, and without jurisdiction. The CIT overlooked the pendency of the First Appeal against the reassessment order.4. Consideration of Evidence and Assumption of Facts:The CIT failed to consider the evidence filed in support of the original reassessment proceedings and the revisional proceedings to establish the nature of the property to fortify the claim u/s 54F. The CIT also did not appreciate that the substitution of the decision/view taken by the Assessing Officer in the framing of the income escaping assessment on the assumption of jurisdiction u/s 263 of the Act was erroneous and invalid.5. Entitlement to Deduction u/s 54F:The primary issue was whether the assessee was entitled to the deduction u/s 54F. The Assessing Officer initially hesitated but later granted the exemption after examining the evidence that the commercial properties purchased by the assessee were converted into residential properties. The CIT observed that the Assessing Officer did not properly examine the contention and directed the Assessing Officer to verify the evidence by referring the matter to the Bangalore Development Authority.Conclusion:The Tribunal found that the Assessing Officer did not apply his mind to the question of how the four flats could be physically converted into a single residential unit and that there were no conclusive evidences on record to show the actual conversion of commercial properties into residential properties. Therefore, the order of the Assessing Officer was deemed erroneous and prejudicial to the interests of the Revenue. The appeal filed by the assessee was dismissed, and the revision order by the CIT was upheld.